For salaried taxpayers investment is a first option to save tax.we suggests you to be aware of many investment options that save tax available in present market. Most of us don’t have idea on conditions that the tax benefits can be rolled back. For example, many individuals fail to know that every investment under section 80C can be roll back with a lock period.
If you withdraw or discontinue then you will lose many of the tax saving benefits.
Termination of traditional life insurance policies-
For tax savings many of us will invest money in life insurance policies under section 80C in last minute unknowingly. Later may realize that the policy selected is a bad one they will terminate or not paying the premiums to the policy. As per income tax rules that the policies terminated before two years will be revoked.
You need to add them back to your taxable Income for the year in which the policy is terminated. Tax deduction claimed will be treated as the ‘Income of the previous year’ in which deduction was claimed.
In case of Single Premium Traditional Plans, the policy should not be terminated within 2 years; else you may lose the tax breaks.
Repayment of Principal amount in Home Loan:
Repayment of principal amount in home loan is allowed as deduction under Section 80C. However, if you sell this house within five years, you have to forget your tax benefits.
The entire amount of tax deduction claimed under Section 80C in prior years on the amount of the principal repayment and payment of registration fees and stamp duty will be added to the taxable income in the year of sale of the property
Rollback is applicable only for the section 80C principal amount of home loan it does not include for interest amount of home loan under section 24.
Rollback of RGESS incentives-
RGESS scheme comes with a lock-in period of three years, including an initial blanket lock-in period of one year. Now, you are not allowed to sell or pledge any eligible security during the fixed lock-in period.
If investor fails in fulfill the conditions, the tax deductions allowed under section 80ccd will be come under the income of previous year.
Withdraw from Senior Citizen Savings Scheme –
Tax saving options for the senior citizens under section 80C and lock period of 5 years.
The amount so withdrawn when we terminated the scheme shall be deemed to be the income of the individual in the year of withdrawal, and shall be tax liable.
Long term Capital gains tax exemptions-
The exemption will be revoked if this new house is sold within three years from its purchase or construction.
The exemption will also be withdrawn if the assessee purchases any additional house other than such residential house within two years after the sale of the long term capital asset.
Withdrawal of Employees Provident Fund -
Salaried employees might contribute for the EPF; this is deducted monthly basis automatically.
If you withdraw the PF amount before expiry of five years continuous service, then the tax will the withdrawable.
The tax deductions claimed on your contributions will be revoked or rolled back, and tax liable.
Tax deductions claimed on PPF, NSC, Fixed deposits, Tuition fees, ELSS investments are not revocable deductions. Therefore keep in mind on the tax deductions and this will help you in effective tax planning.